401K Help!?

Question

I am 23 and have invested in my company's 401K since age 21. When I signed up for the 401K I decided to put in 3% of my pay, because it said the company will match up to 3%. Does this mean they are putting in 3% and I am putting in 3% also for a total of 6% (I have recently raised it to 5%)? Also, I know I put all of my money into stocks, one high risk, two medium and one low, I have no idea why I picked the ones I did, cause I do not know what all that info means in the packets for them. What is my best option to find out what the good stocks are, and am I doing well by putting it all in stocks? What is the normal % people put into their 401Ks at my age? Thanks...

Answer 1

Your employer will match up to a certain percentage....find out what that percentage is and contribute at least THAT much ..think about it!!..it's like getting paid THAT much more than someone who is not contributing!!
Also.. I think most likely you are invested in mutual funds, not actually stocks, and the way you have them divvied up is just fine, but I would suggest studying your "packets" a little closer.....you have to come to a better understanding of what you are invested in... you've got a lot of time to do it, but don't put it off forever (it's not as hard to understand as it looks at first)
It's your money we're talking about here!! You worked for it...now if you learn a few terms and see where your money actually is...you may be able to get it to work a little harder.
I think MSN's beginner's site may give you some info you can use
http://moneycentral.msn.com/beginnerguide.asp?page=introduction
They are talking about making your own investments, but you can apply some info to your 401....and can research the funds in your plan . Good luck
Ooops! I just re-read your question ...and you are getting the maximum match...and contributing more.... You're doing fine!!
But, any time you get a raise, think about upping your contribution a little....don't " give 'til it hurts" but get close!!

Answer 2

You should at least put in whatever the employer will match. At the very least. If you are putting in 3%...that is 3% of your pre-tax salary. Is your employer matching 100% of 3%? If so, they are matching dollar for dollar what you are putting into your account if you are putting in 3%. Sometimes, employers will matching 50% of the first 3%...meaning that they are putting in half of what you are. Either way...it's free money for you. Take it.

I don't know what your specific investment options are so I can't advise you on your choices. You should try to diversify and not put it all into one stock. Mutual funds can help diversify.

As to how much you should be contributing at this age...the more you contribute, the more financially sound your life will be come retirement. This means less worrying in your 40's and 50's about what lies ahead. The artcle below will help you.

You should also increase the percentage you are contributing each year when you get a raise. So, if you can only contribute 5% this year, make an effort to increase that to 6% or 7% when you get a raise.

Good luck!

Answer 3

From the wording you used, it seems as though your employer will match every last dollar you put in up to 3% of your pay. So if you put in 3% and they match it, the amount would be the same as if you had put in 6%. When you're putting in 5%, they're still only matching the first 3%.

I'm 22, and as young as you and I are, we can afford to be much more aggressive. I'd advise having all your money in stocks, but mixed between funds. The formula I use for myself is to put approximately 50% in growth funds (a fair mix, large cap, mid-cap, etc.), 25% in value funds (a little safer than growth stocks, but usually not with the explosive growth potential), and 25% in an index fund, like the Vanguard 500. I'd also advise trying to have about 20% of your portfolio in international funds.

You want to keep little or no money in cash or bonds being as young as you are. You'll benefit more in the long run by holding on to those growth and value funds for several years before adding in some safer options.

Answer 4

Sounds good for what you are doing "at your age". At my age, well, I'm old enough to be your father, I have a big chunk in the annuity and bonds, particularly inflation-protected treasuries (TIPs). If you were to include something other than stocks, I suggest you look into TIPs if your program has them. My retirement program has a really good REIT (real estate investment trust) that isn't suffering from the supposed "housing bust". Among the stocks, please look to see if you have a fund for Global issues. Between the TIPs, REIT, and Globals, you would only want one or two domestic stock funds, say a general and an aggressive (you are young enough that it will recover when the bad years come, and they will). When checking out your funds, look for numbers like percent gain for last 5 or 10 years or even from the "inception" of the fund. Since we are talking retirement money, as in long-term, you want to see the long-term track record for where you put your money. That isn't to say that recently started funds are bad, it is just that if you had two to chose from and one gained 5 percent and the other 140 percent over the long run, you know which to ignore.

Answer 5

Molly the company is matching the 3% that you put into your 401(k). This means that for every 3% you invest, they are investing 3% as well, the same way that you are.

You will be investing for 40 years, so the riskier you go, the better. You will make more money in the long run.

When I was your age, I invested 15% into my 401(k). It hurts for the first few paychecks, but you adjust. Also, your money builds up very quickly.

Call your funds manager and ask them a bunch of questions; that is what they are there for.

Answer 6

You percentages are correct for your age. You can take a bit of risk at your age and you are still being somewhat conservative. Here's the key...... the money you invest is non-taxable as opposed to your paycheck. You put in the maximum allowed and if you need it you can take it out and then will be taxed just like if it was on your paycheck. If you pay it back in a certain time you will not be taxed. As far as the flyers..... yes they are confusing. Basically what you are shooting for is the funds with a 12% return as this is the base line. This is nice and safe. Going higher is a bit riskier but as I said you are young. What you look at is what each fund leans toward. Look for the ones that are leaning toward medical related investments as people are living longer.